Odd couple is making merger work

Thursday marks a year since General Electric and Universal Studios joined forces.

LOS ANGELES -- When General Electric Co. and Universal Studios came together in a $14 billion marriage a year ago, it seemed like an odd pairing. GE likes order and predictability; Universal operates in a world where hunches and high-stakes gambles are the keys to success.

Although the couple have made it to their first anniversary, both are still getting to know each other's corporate quirks, not all of which have been easy to accept.

Executives throughout the newly merged company, which includes Universal's theme parks, have become both ambassadors and teachers, explaining the basics of their businesses to each other.

In January, at a management conference for GE executives in Boca Raton, Universal Pictures Chairwoman Stacey Snider did her best to educate about 650 executives from such far-flung divisions as medical technology, equipment services and plastics about the movie business.

Universal Pictures executives have had their own steep learning curve.

Last fall, Snider's lieutenant, Vice Chairman Marc Shmuger, was the studio's representative on a three-week GE leadership course. He traveled the country with other GE executives to study "global growth strategies" at an assortment of nonentertainment companies with ties to GE. When the visits were done, the team was required to write up its findings.

"It was definitely different," recalled Shmuger. "I had to work hard to keep an open mind."

Top executives say that, for the most part, the integration of Universal with GE and its NBC television operations has gone smoothly and profitably, living up to the theme of Thursday's merger anniversary: "One Year, One Company, One Vision."

"I haven't seen any evidence of a culture clash," NBC Universal Chief Executive Officer Bob Wright said in an interview last week. But he acknowledged that "there's always going to be some people disappointed with some aspect of something."

Most of the wariness and friction has emanated from Universal's California back lot, where GE has implemented cost-saving programs and disrupted long-standing business relationships.

In a bid to get cheaper prices for services, GE has instructed the studio to use the company's "preferred vendors" for camera rentals, film labs, overnight couriers and air travel, among others.

For the majority of studio executives, GE has ended company-paid car insurance, car allowances, and subsidized gasoline from pumps on the studio's back lot. It also has restricted business- and first-class travel for many executives and no longer reimburses them for the cost of pay-per-view movies in hotel rooms.

In the last year, Universal has also cut back on one of the industry's most cherished rituals -- giving lavish gifts to stars and filmmakers -- suggesting that no present exceed $100. That's a pittance by the standards of Hollywood, where agents and studio executives frequently send gifts costing thousands of dollars.

Chairwoman Snider said that, although there have been cost reductions throughout Universal, "there wasn't a tremendous impact" on her film division.

Snider and her boss, Universal Studios President Ron Meyer, successfully argued to the new brass that, if the studio was going to operate as a first-class entertainment company, senior executives should be exempted from some of the travel restrictions and crackdown on perks.

Meyer said he and Snider explained to Wright and GE Chief Executive Officer Jeffrey Immelt "how our business differs from GE and even NBC."

Meyer and Snider said Universal Pictures has not been forced to slash its production and marketing budgets or make deep staff cuts.

Snider said that, although Universal must now estimate costs and revenues on a quarterly rather than yearly basis, GE has not been vetting individual movie budgets, as several sources close to the studio have alleged.

"They don't drill down into production and marketing costs," Snider said. "They have not scrutinized the budget of individual movies." Instead, she said, movies are evaluated after their release based on how they compared with original projections. So far, the math has worked in the studio's favor, leading Wright to say that he has yet to see the kind of volatility that often characterizes the movie industry.

Universal, in fact, has had a solid run with such box-office hits as Meet the Fockers and The Bourne Supremacy. The box-office haul from those movies not only helped offset such disappointments as Van Helsing and The Chronicles of Riddick, it also helped cushion NBC's fall from its perch as the No. 1 television network among viewers ages 18 to 49 -- those most coveted by big advertisers.

The question being asked around Hollywood, however, is how GE might respond should Universal's fortunes falter.

"I can't imagine that they would be prepared for the kind of volatility that you get in the movie industry," said Jim O'Toole, a professor of management at the University of Southern California.

One area in which the studio's executives have felt cultural changes and a geographical shift since the GE takeover has been in the number of meetings they're expected to attend in New York.

Snider has privately complained to many colleagues about the many presentations she has had to make and the increased demands on her time.

She also said that her boss, Meyer, "takes a lot off my shoulders" by spending as much as two weeks each month in New York.